Monday, November 10, 2014

William Vanderbilt: The Mistaken Robber Baron

The
life of Cornelius Vanderbilt was filled with cut throat competition. A man of
extraordinary energy, he build two business empires. First was a maritime
transport empire. And the second was a railroad empire. Vanderbilt became
recognized as a ruthless tycoon, earning the title of robber baron. However, in
1877, he passed away and left his wealth to his eldest son, William Vanderbilt.
William was mostly a contradiction of his father. And his life would prove to
this fact.

William
Vanderbilt was a great railroad tycoon. Known to his close associates as Billy,
he was born on May 8, 1821 in New Brunswick, New Jersey. As a boy, he studied
in the Columbia Grammar School until 1839. His upbringing, however, was
terrible. Although he enjoyed luxury, he never enjoyed his father. His father,
the domineering and arrogant “Commodore” Cornelius Vanderbilt, belittled Billy.
The Commodore saw Billy as incompetent, weak, and unfit to become his
successor. In an attempt to teach the boy about business, after leaving school
in 1839, Billy was sent to work in a ship chandler’s shop for a year. In 1840,
he worked as a clerk in the Drew, Robinson, & Co. From his work, Billy was
able to learn accountancy. Later, he was offered by one of the firm’s partner,
Daniel Drew, to become a partner in a new venture. Drew, however, was one of
the Commodore’s arch nemesis. Hence, Billy declined the offer under intense
pressure from his father.

At
the age of 19, late teen age William made the best mistake of his life. At
young age, he married Maria Louisa Kissam, a well-off daughter of a good
family. This cause dismay to his father who thought that it was untimely and
early. The decision reinforced the Commodore’s thought of his son as unworthy
to become his heir. As a punishment for his action, the Commodore sent Billy
and his wife to Staten Island and live there without support. Billy and his
wife left for Staten Island and live by means of using the huge 70 acre land
that the Commodore gave them.

Scorned
by his father, William soon proved his father wrong about him being incompetent
and weak. He worked hard and made his farm profitable and productive. So
profitable that he was confident enough to expand the farm from 70 to 350
acres. In order to do so, he needed to get a mortgage. But his father was
unwilling to help him in getting the mortgage. However, William managed to
persuade his father and supported him in getting the mortgage later on. When
the expansion succeeded, William’s farm became one of the best and most
successful farm in Staten Island. His success in running the farm earned him
the highly sought respect of his father.

In
1857, the United States underwent an economic recession with the Panic of 1857,
several business became unprofitable and most went bankrupt. In Staten Island,
the short Staten Island Railroad became a victim of the recession. The railroad
faced bankruptcy. William saw the Staten Island as important to the area and
for his farm. Also, it was also a chance to show further to his father his
capabilities. He then asked for his father for help to make him a receiver and
an executive in the Staten Island Railroad. His father supported him and
William became part of the railroad company.

His
work in the Staten Island became a success story. In the following years after
his entry, Staten Island turned around from a bankruptcy into profitability.
Much of which was credited for William’s emphasis in good quality and
maintenance services. His works in Staten Island further enhanced his
relationship with his father.

In
1864, his father became confident enough to give William tougher
responsibilities. William became recognized as the Commodore’s heir. On the
same year, William was appointed vice president of his father’s Harlem
Railroad. A year later, he became also became vice president of the Hudson
River Railroad. For a decade he worked with his father for more than a decade
until in 1877. On that year, Commodore Cornelius Vanderbilt passed away. All of
his wealth and railroad empire fell to William’s hands.

William
attained a huge amounts of wealth. He received $90 million of his father’s huge
money. Moreover, he gained the presidency of his late father’s railroad empire.

But
when William assumed the presidency of the railroad companies, the whole
economy faced once again a terrible economic crisis. Four years prior to 1877,
the United States was struck by the Panic of 1873. Years of overbuilding the
railroads caused for the industry to become saturated. Numerous competition
caused for cut throat and unprofitable rate wars. With the Panic, much of the
unprofitable rate wars effects became visible. Numerous railroads failed and
many took measures to avoid the same fate by cutting wages. Make huge railroad
companies like the Erie and Pennsylvania slashed wages, which caused riot among
disgruntled workers.

In
this time of crisis, William showed a part of himself that was not a hallmark
of his deceased father. William was much more sympathetic and respectful
towards his workers. A character unseen in his late father. In 1877, much of
the railway industry slashed their wages by 10%, Vanderbilt followed the trend.
However, his company was spared from the violence of disgruntled workers
because Vanderbilt negotiated a deal. He promised to workers that $100,000
would be divided by workers who would refrain from striking or rioting. In
addition, he promised that if the profit was good, he would returned the wage
back to normal and before the 10% decrease. Most workers agreed. 9,000 of the
11,000 agreed to the deal. And by October of the same year, the wages returned
to normal. For Central Railroad, it recorded a profit of $30 million.
Vanderbilt managed to keep the Central Railroad afloat during the midst of
chaos and depression.

Following
his victory in the Central, in 1878, he faced a new challenge. This time, the
problem was not from the economy or the railroad industry, but closer to home –
his siblings. In 1878, his brother, Cornelius Jeremiah Vanderbilt and two of
her sisters contested the will of their father. In accordance to the will of
the Commodore, Cornelius J. only received $200,000; and, the two sisters
received $300,000 and $500,000. They contested the portion that after each of
them received a specific amount, the rest would go to William. A court battle
raged for a year until both parties decided to settle. From the settlement,
each of William’s eight sisters would receive additional $500,000 and Cornelius
J. would annually receive a million dollars for life.

While
the lawsuit between the siblings raged, William continued to work on his
railroad empire. In 1877, he supported the foundation of the Eastern Trunk Line
Association, which aimed to end dangerous rate wars and bring the industry to a
much more stable condition. In 1878, Vanderbilt got interest over few railroads.
In a deal with Jay Gould, William received large shares of the Michigan Central
and Canada Southern Railroad. Later on, he combined the two railroads and
became the President. In 1879, William needed more capital to retain the
Central from the intense competition in the industry. He sought the help of the
Drexel, Morgan, & Co. to sell 300,000 shares of stocks of the Central
Railroad. The famous banker and financier, J.P. Morgan, successfully sold the
shares to British investors. As reward for his deeds, Morgan asked for a seat
in the board of directors of Central Railroad. William agreed and two began a
powerful alliance. In 1881, he gained control of the Chicago and Northwestern
Railroad and sizable amount of control over the Cleveland, Columbus,
Cincinnati, and Indianapolis Railroad. In 1882, William continued to expand his
interests. He gain a large amount of shares in the New York, Chicago, and St.
Louis Railroad or the Nickle Plate. He also had stocks in the Western union
Telegraph Company until 1881, when he decided to sell his stake.William,
however, was not safe from criticism like his father and other business moguls.
In October 1882, William shut ed down the mail service that ran across his Chicago
Line because it's unprofitable. The press took the issue seriously and criticized William for not taking into consideration the public. William tried
to comment on the issue. But In an interview William allegedly said, “The Public
be dammed.” But there were many variations to what truly transpired, but
Vanderbilt did not really said the praise. What he said is that railroads do
not run for public benefit but for profit and if the public wanted a mail
service, they needed to pay for it. His comment was misquoted, manipulated, and
sensationalized by the media. And from the Public be Dammed comment, William
was mistakenly ranked among the Robber Barons.

Because
of the issue, William must sell some of his shares in order to appease the
public. He sold some of his holdings with the help of J.P. Morgan and made $30
million. He also resigned as President of all his railroad companies but remain
as chairman of board of each. He also began to transfer day to day affairs to
his sons and his seasoned managers.

After
the outcry from the public from the misquotation, in 1883, William’s control
over the railroads of New York was challenged. His good relationship with Jay Gould ended. Gould took part in the establishing of the West Shore Line. A line
which had exactly the same route as the Central. It threatens the profits and
dominance of the Central over the route. In July, when West Shore Line opened
for service. Vanderbilt slashed his rates to drive the West Shore into
bankruptcy. Within a year, William was successful. However, West Shore Line was
bought by a more formidable company – Pennsylvania Railroad. Again, William
continued to wage a rate war against Pennsylvania Railroad. For two years, it
took a toil to Central. Its profits drop. From 1883 to 1885, profits drop from
$33.7 million down to $24.4 million. In order to reduce Pennsylvania Railroad’s
profits, he solicited the help of two other great tycoons of his time, Andrew Carnegie and John Rockefeller. He wanted them to build a Southern Pennsylvania
railroad to challenge Pennsylvania Railroad’s dominance in the Pennsylvania.

In
1885, the war between Central and Pennsylvania concluded. With both sides tired
and weary, the two parties agreed to a settlement brokered by J.P. Morgan
aboard his yacht, the Corsair. Central was represented by Chauncy Depew and the
Pennsylvania Railroad was represented by George Roberts. From the agreement,
Central would purchase the West Shore Line while Pennsylvania Railroad would
purchase the planned Southern Pennsylvania Railroad.

The fight with Pennsylvania, however, would be
his last. On December 8, 1885, William Henry Vanderbilt passed away in Staten
Island, New York. On his end, he left the Central as one of the most
successfully run railroad company and worth $200 million. He left $10 million
to his eight children and the rest was divided by his two eldest sons. Before
he passed away, he also donated $450,000 to the Vanderbilt University and
$50,000 to his Episcopal Church.

William
Vanderbilt was less well-known than his father but equal in their achievement.
The Commodore was famous for making a railroad empire. But his son was famous
for keeping that empire alive and thriving under dire situations. Although he
did not inherited the adventurist mind of his father, but he showed a side that
his father never did. He showed compassion and respect for his workers and did
not engage in predatory competition so much, only with the exception of the
fight for West Shore Line. He was mistakenly labelled as a robber baron even
though he never deserved becoming one.